Viewpoint: Bullish
MM has remained bullish XRO through 2021 calling new highs above $160 as this quality online accounting operator continues to fit our road map for equities perfectly.
The ASX200 bounced 0.6% yesterday as broad-based gains offset weakness in the Banking Sector, the market clearly hasn’t read the seasonality script i.e. this time of year the banks usually rally following the results and looming dividends of 3 of the “Big 4 Banks” in the coming weeks.
CBA is often referred to as the world’s most expensive bank but while it keeps delivering sellers are likely to be conspicuous by the absence especially given its planned well for the future on the technology front.
WBC dominated the stock news yesterday after disappointing the market and subsequently being punished 7% making fresh 9-month lows in the process. The positives of a $3.5bn buyback and 60c fully franked dividend couldn’t mask the issues under the hood.
BOQ has been on the MM radar over recent months and just as the volatility unfolded post WBC’s report the Queensland based regional bank has retraced 12% to our initial target area.
MM has not changed its reasoning to like VUK, its cheap and exposed to the UK.
Copper is often regarded as a leading indicator of future economic strength and the dip over the last fortnight is another illustration, along with the lacklustre 10-year bond yields, that investors are concerned that looming rate hikes will stifle economic growth plus of course China continues to be its unpredictable self. We believe moving into 2022 optimism will again return to financial markets which should assist the Resources Sector.
Crude oil made fresh multi-year highs in October but it actually closed the month basically unchanged and after rallying almost 40% since late August a period of consolidation feels likely – but we still anticipate higher prices into 2022.
The Australian Dollar is one currency that’s is fitting our road map nicely after bouncing strongly in October. Our target for the $A remains well in excess of 80c which does provide an encouraging extrapolation for our bullish view towards metals into 2022.
Australian bond yields have surged over recent weeks as prices were hammered however a quick glance back over the last 30-years illustrates its hardly a dent in the prolonged bear market. We can see Australian 10-year bond yields settling back in the 2.5-3% region where they spent most of the last 5-years, making the dip under 1% simply a COVID aberration. Then we will see if inflation can be contained after many years of central banks pumping money into the economic system.
